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Condensed Reviewed Provisional Consolidated Results for the Year Ended 30 June 2018 and Dividend Declaration
TELEMASTERS HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number 2006/015734/06
Share code: TLM & ISIN Number: ZAE000093324
(“TeleMasters” or “the Company” or “the Group”)
CONDENSED REVIEWED PROVISIONAL CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED
30 JUNE 2018 AND DIVIDEND DECLARATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
REVIEWED AUDITED
Year ended 30 June Year ended 30 June
2018 2017
R R
Revenue 113 567 969 120 628 317
Cost of sales (70 587 555) (80 135 980)
Gross profit 42 980 414 40 492 337
Other income 215 618 185 282
Operating expenses (38 688 260) (36 488 150)
Operating profit 4 507 772 4 189 469
Investment revenue 519 405 247 726
Finance costs (888 349) (811 378)
Profit before tax 4 138 828 3 625 817
Taxation (1 038 211) (1 168 424)
Profit for the year 3 100 617 2 457 393
Other comprehensive income for the year - -
Total comprehensive income for the year 3 100 617 2 457 393
Profit and total comprehensive income
3 100 617 2 457 393
attributable to the owners of the Company
EARNINGS PER SHARE:
Basic earnings per share (cents) 7.38 5.85
Dilutive earnings per share (cents) 7.38 5.85
Headline earnings per share (cents) 7.36 5.85
Dilutive headline earnings per share (cents) 7.36 5.85
The earnings per share/ dilutive earnings per share
and headline earnings per share were determined
using the following information:
Basic and dilutive earnings - used in the
calculation of basic and dilutive earnings per
share
Earnings attributable to owners of the Company 3 100 617 2 457 393
RECONCILIATION BETWEEN EARNINGS AND HEADLINE EARNINGS:
Earnings attributable to owners of the Company 3 100 617 2 457 393
Adjusted for:
Profit on disposal of plant and equipment (13 587) -
Tax effect of profit on disposal of plant and
equipment 3 804 -
Headline earnings for the year 3 090 834 2 457 393
30 June 2018 30 June 2017
Weighted average number of ordinary shares in
42 000 000 42 000 000
issue
Dividends declared per share (cents) 5.00 2.00
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
REVIEWED AUDITED
As at 30 June As at 30 June
2018 2017
ASSETS R R
Non-current assets
Property, plant & equipment 14 741 336 20 081 413
Goodwill 3 286 779 2 686 779
Intangible assets 1 380 409 913 762
Prepayments 4 240 060 6 462 727
23 648 584 30 144 681
Current assets
Inventories 627 371 660 142
Trade and other receivables 8 646 270 14 991 947
Prepayments 4 731 260 4 703 906
Cash and cash equivalents 10 874 279 4 269 126
24 879 180 25 625 121
Total assets 48 527 764 54 769 802
EQUITY AND LIABILITIES
Total equity
Issued capital 48 059 48 059
Retained earnings 35 650 324 34 649 707
35 698 383 34 697 766
Non-current liabilities
Finance lease obligation 835 185 2 369 347
Deferred income 201 884 462 213
Deferred tax 897 146 199 521
1 934 215 3 031 081
Current liabilities
Other financial liabilities - 2 995 385
Current tax payable 340 585 123 024
Finance lease liabilities 2 217 241 2 943 066
Trade and other payables 7 966 630 10 634 503
Deferred income 260 329 260 329
Bank overdraft 110 381 84 648
10 895 166 17 040 955
Total liabilities 12 829 381 20 072 036
Total equity and liabilities 48 527 764 54 769 802
Number of shares in issue 42 000 000 42 000 000
Net asset value per share (cents) 85.00 82.61
Net tangible asset value per share (cents) 73.88 74.04
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
REVIEWED AUDITED
Year ended 2018 Year ended 2017
R R
Cash flows from operating activities
Cash generated from operations 17 935 905 7 653 512
Interest paid (888 349) (461 162)
Tax paid (123 025) -
Net cash from operating activities 16 924 531 7 192 350
Cash flows from investing activities
Additions to plant and equipment (1 539 208) (3 806 001)
Proceeds on disposal of plant and equipment 85 000 78 706
Additions to intangible assets (1 012 520) (461 200)
Acquisition of subsidiary (300 000) -
Investment revenue received 519 405 247 726
Net cash used in investing activities (2 247 323) (3 940 769)
Cash flows from financing activities
Proceeds from other financial liabilities - 600 000
Repayment of other financial liabilities (3 443 937) -
Repayment of finance leases (3 026 190) (2 373 185)
Dividends paid (1 627 660) (837 390)
Net cash used in financing activities (8 097 787) (2 610 575)
Total cash movement for the period 6 579 421 641 006
Cash and cash equivalents at the beginning of
year 4 184 478 3 543 472
Cash and cash equivalents at the end of year
including bank overdraft 10 763 899 4 184 478
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Total
Share Share share Retained Total
capital Premium capital Earnings equity
R R R R R
Balance at 01 July 2016 4 200 43 859 48 059 33 032 314 33 080 373
Comprehensive income
- Profit for the year - - - 2 457 393 2 457 393
Total comprehensive income - - - 2 457 393 2 457 393
Transaction with owners
- Dividends - - - (840 000) (840 000)
Total transactions with owners (840 000) (840 000)
Balance at 30 June 2017 4 200 43 859 48 059 34 649 707 34 697 766
Comprehensive income
- Profit for the year - - - 3 100 617 3 100 617
Total comprehensive income - - - 3 100 617 3 100 617
Transaction with owners
- Dividends - - - (2 100 000) (2 100 000)
Total transactions with owners (2 100 000) (2 100 000)
Balance at 30 June 2018 4 200 43 859 48 059 35 650 324 35 698 383
NOTES TO THE FINANCIAL STATEMENTS
1. COMPANY PROFILE
TeleMasters is licensed to provide voice, data and cloud based corporate communications. It supplies fixed-line,
fixed cellular, fixed data and virtual PBX services countrywide.
2. FINANCIAL RESULTS
2.1. Statement of compliance and basis of preparation
The condensed consolidated financial statements for the year ended 30 June 2018 are prepared in accordance
with the requirements of the JSE Limited Listings Requirements for provisional reports and the requirements of the
Companies Act of South Africa. The Listings Requirements require provisional reports to be prepared in
accordance with the framework concepts and the measurement and recognition requirements of International
Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards Council and to
also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The accounting policies
applied in the preparation of the condensed consolidated financial statements are in terms of IFRS and are
consistent with those applied in the previous consolidated annual financial statements
The consolidated annual financial statements were reviewed by Nexia SAB&T, who expressed an unmodified
review conclusion. The auditor’s review conclusion is available for inspection at the Company’s registered office.
The auditor’s review conclusion does not necessarily report on all of the information contained in this
announcement. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the
auditor’s engagement they should obtain a copy of the auditor’s review conclusion together with the accompanying
financial information from the issuer’s registered office.
The directors take full responsibility for the preparation of the provisional report. These results were prepared under
the supervision of Brandon Topham CA (SA) ACMA.
2.2. Commentary on operating results
The Gross profit percentage has increased to 37.8% compared with 33.5% in the prior year. The transition from
older, GSM SIM card technology deployed at customers over the last 22 years, to data service-based voice and
internet access services are both cheaper and deployed with higher margins. The reduction in turnover is partially
reflected by the new and replacement sales of the newer technology but also due to the loss of customers that
could not be served.
The appointment of new CEO Jaco Voigt on 1 January brought a change in direction in the sales channel strategy
as well as an acceleration in the introduction of more comprehensive offerings to customers. TeleMasters’ new
ground-breaking unified communication services are in many cases proprietary and unique. These services are
offered at very good margins but require investments in sales expertise over the next financial period.
We have in this financial period managed to keep our operating expenditure relatively stable with an increase of
6% despite our more profitable gross profit margin. This resulted in an increased operating profit before tax of
R4 138 828 compared with R3 625 817 in the 2017 year. Our earnings per share increased from 5.85 cents per
share to 7.38 cents per share, an increase of 26% with an increase of Headline Earnings per share of 26.50% to
7.36 cents up from 5.85 cents per share in 2017.
The net cash from operating activities increased by a healthy 135% to R16 924 531 compared with R7 192 350 in
the 2017 year. This positive cash generation is a key component of our business principles and is a result of our
focus on building an annuity-based business model.
The Net Asset Value increased to 85 cents per share compared with 82.61 cents per share in 2017, this despite
dividends of 5 cents per share being paid to shareholders, compared with 2 cents in the prior year.
Our current working capital ratios and borrowings as a percentage of fixed asset ratios have improved in line with
the improved liquidity position of the Group.
2.3. Dividends paid and notice of declaration of a dividend
The Board does not primarily link the payment of dividends to the current year’s operating results, but considers
the dividends in relation to the Group’s reserves of R35.69 million in 2018 (R34.69 million in 2017). The Board
considers the working capital requirements of the Group for the next 12-month period when determining a dividend.
The Board considers that dividends are an important reason why shareholders invest in a Company and hence
hold the principle of paying quarterly dividends highly.
The following dividends were declared during the year to date:
• A dividend of 1.00 cents per share was declared and payable to all shareholders recorded in the share
register of the Company at the close of business on Friday, 20 October 2017.
• A dividend of 1.00 cents per share was declared and payable to all shareholders recorded in the share
register of the Company at the close of business on Friday, 12 January 2018.
• A dividend of 1.50 cents per share was declared and payable to all shareholders recorded in the share
register of the Company at the close of business on Friday, 20 April 2018.
• A dividend of 1.50 cents per share was declared and payable to all shareholders recorded in the share
register of the Company at the close of business on Friday, 20 July 2018
The Board remains committed to the policy of quarterly dividends.
During the comparative year ended 30 June 2017, the Company declared four dividends totalling 2 cents per share.
Notice is hereby given that a dividend of 1,5 cents per share is declared and will be paid to all shareholders recorded
in the share register of the Company at the close of business on Friday, 19 October 2018. The dividend will be
subject to the Dividends Tax that was introduced with effect from 1 April 2012. In accordance with the provisions
of the Listings Requirements of the Johannesburg Stock Exchange, the following additional information is
disclosed:
- the dividend has been declared out of retained earnings;
- the local Dividends Tax rate is 20%;
- the gross local dividend is 1.5 cents per share for shareholders exempt from Dividends Tax;
- the net local dividend is 1.2 cents per share for shareholders liable for Dividends Tax;
- the Company has 42 000 000 ordinary shares in issue;
- the Company’s income tax reference number is: 9683978143.
The following dates are applicable to the dividend:
The last day to trade in order to be eligible for the dividend will be Tuesday, 16 October 2018. Shares will trade ex-
dividend from Wednesday, 17 October 2018. The record date will be Friday, 19 October 2018 and payment will be
made on Monday, 22 October 2018.
Share certificates may not be dematerialised/re-materialised between Wednesday, 17 October 2018 and Friday,
19 October 2018, both days inclusive.
2.4. Acquisition of property plant and equipment
Property, plant and equipment acquired during the year were comprised mostly of investments in IT equipment and
routers and handsets to assist with the expansion of the Digital Direct product.
Reconciliation of Opening Additions Disposals Depreciation Closing
property, plant and balance balance
equipment – 2018
Furniture and fixtures 168 090 - - (20 039) 148 051
Motor vehicles 311 989 - (71 413) (123 321) 117 255
Office equipment 72 884 10 674 - (18 044) 65 514
IT Equipment 462 738 16 826 - (140 699) 338 865
Routers and handsets 19 065 712 2 277 911 - (7 271 972) 14 071 651
20 081 413 2 305 411 (71 413) (7 574 075) 14 741 336
2.5. Business Combinations
Goodwill for the Group increased by R600 000 from R2 686 779 to R3 286 779 due to the acquisition of Spice
Telecom (Pty) Ltd during the current period.
On 1 January 2018 the Company acquired 100% of the issued equity of Spice Telecom (Pty) Ltd, with fair value of
assets and liabilities of zero, for the cash consideration of R600 000, resulting in Goodwill of R600,000 being
recognised. Spice Telecom (Pty) Ltd will contribute to the Telecommunications operations of the Group through its
existing market participation.
2.6. Prepayments
The decrease of R2.2 million in prepayments is mainly due to a decrease in the amount of prepaid commissions
paid in advance, based on revised commission payment structures implemented during the current period.
2.7. Finance lease liabilities
The decrease of R2.2 million in finance lease liabilities are mainly due to repayments of R3.026 million against new
leases amount of R766K.
2.8. Other financial liabilities
The liability payable to Masion D’ Obsession Trust was settled in full during the current financial year.
2.9. Trade and other receivables
Trade receivables have decreased from the previous financial period from R11.1 million to R9.3 million due mainly
to stringent control over outstanding debt in the current period. Allowance for credit losses have increased by
approximately R2.9million due mainly to the continued doubt relating to a receivable which the Company continues
to legally pursue. Furthermore, accruals for revenue invoiced in arrears decreased from R4.1million to R3.2million
due mainly to a decrease in trading activities.
2. 10. Trade and other payables
Trade payables decreased by R1.5million from the previous period due mainly to settlement of outstanding
liabilities. Furthermore, accruals for cost related to revenue which is invoiced in arrears decreased from R4 million
to R2.7 million in the current financial period mainly due to a decrease in trading activities.
3. SEGMENT REPORT
IFRS 8 requires an entity to report financial and descriptive information about its reportable segments, which are
operating segments or aggregations of operating segments that meet specific criteria. Operating segments are
components of an entity about which separate financial information is available that is evaluated regularly by the
Chief Operating Decision Maker. The Chief Executive Officer is the Chief Operating Decision Maker (“CODM”) of
the Group.
Based on a consideration of the above, it can be concluded that the Group does not have different operating
segments. The business is conducted in South Africa and is managed centrally and has no branches. The Group
is managed as one operating unit.
- The requirement of an operating segment is that the results of the component of the entity are regularly
reviewed by the CODM, however the nature of the services is such that the internal reporting thereof to
the CODM is allocated as a single operating segment due to the similarity in nature, process, clients,
method of delivery and regulatory environment.
- The nature of Group's business is that of a service provider. The services provided are performed from a
single source technology basis. The services provided are billed to single customers, charged on the type
of service provided. These range from fixed line services, to cellular services as well as to data and VOIP
services. The services provided are not separately run segments or divisions and are managed from a
single source, employee and asset base perspective.
- The asset and liabilities used in providing the services are indistinguishable from each other and the same
technology platforms are used in providing all services to a customer. It is therefore impossible to obtain
specific discernible financial information, except for the billing raised specific to the service which has
been charged. This information is presented as such to the CODM.
All revenues from external customers originate in South Africa, thus our geographical locations of operations are
restricted to a single area, South Africa.
LCR and Digital Direct, our main technologies, are two technologies which are fully integrated to provide one
telecommunications solution to our customers and are not separately managed.
No single customer makes up more than 10% of the Group’s Revenue.
4. RELATED PARTIES
Subsidiaries Spice Telecom (Pty) Ltd
Skycall Networks (Pty) Ltd
Members of key management BR Topham (from 1 September 2017)
J Voigt (from 1 January 2018)
MB Pretorius
T Smith (to 31 August 2017)
Non-executive directors M Tappan (from 1 February 2018)
DS Van der Merwe (to 31 May 2018)
MG Erasmus
WF Steinberg (from 1 June 2018)
Entities in which a member of key management and/or non-executive director have a beneficial interest
BR Topham Seesa (Pty) Ltd
TAG Consulting (Pty) Ltd
TAG Employee Fund Administrators (Pty) Ltd
BRAT Trust
MB Pretorius Snowy Owl Properties 82 (Pty) Ltd
Maison D' Obsession Trust
TeleMasters (Pty) Ltd
Zero Plus Trading 194 (Pty) Ltd
MG Erasmus Arbor Capital Company Secretarial (Pty) Ltd
Arbor Capital Corporate Finance (Pty) Ltd
J Voigt PerfectWorx Consulting (Pty) Ltd
Contineo Virtual Communications (Pty) Ltd
30 June 2018 30 June 2017
Related party balances
Loan accounts - Owing (to) by related parties
Maison D' Obsession Trust - (2 995 379)
Amounts included in Trade receivables (Trade payables)
regarding related parties
Snowy Owl Properties 82 (Pty) Ltd 200 574 130 995
Perfectworx Consulting (Pty) Ltd (25 760) -
Telemasters (Pty) Ltd (175 920) -
Related party transactions
Interest paid on other financial liabilities
Maison D' Obsession Trust 91 083 350 216
Purchases from related parties
Zero Plus Trading 194 (Pty) Ltd 226 500 -
PerfectWorx Consulting (Pty) Ltd 1 378 318 2 194 875
Contineo Virtual Communications (Pty) Ltd 7 491 419 6 534 206
TeleMasters (Pty) Ltd 175 439 210 526
Rent paid to related parties
Snowy Owl Properties 82 (Pty) Ltd 1 795 425 1 378 895
Administration fees paid to related parties
Seesa (Pty) Ltd 56 407 -
BRAT Trust - 21 272
Arbor Capital Company Secretarial (Pty) Ltd 135 000 120 000
Arbor Capital Corporate Finance (Pty) Ltd 90 000 120 000
TAG Consulting (Pty) Ltd 333 593 248 553
Sales to related parties
Contineo Virtual Communications (Pty) Ltd 43 013 -
TeleMasters (Pty) Ltd 503 846 385 430
TAG Employee Fund Administrators (Pty) Ltd 14 083 -
Compensation to Executive Directors
Short-term employee benefits – Executive Directors 2 333 692 1 792 511
5. SUBSEQUENT EVENTS
Other than the dividends declared and paid after year end as disclosed in note 2.3, the directors are not aware of
any matter or circumstance arising since the reporting date which would have a material effect on the consolidated
results or the consolidated financial position of the Group as reported.
6. LITIGATION
There are currently no legal proceedings of which the Group is aware which may have, or have had in the 12
months preceding the date of this report, a material effect on the consolidated position of the Group, other than as
disclosed below:
• As previously disclosed, the Group is currently involved in litigation with a previous client pertaining to
outstanding receivables to the value of R3, 06 million, however these receivables are adequately secured
through a cession of listed shares held against the debt owed to the Group. The matter is being arbitrated
and is pending a decision.
The estimated legal fees to continue pursuing these legal matters are approximately R200 000.
7. GOING CONCERN
The Board of directors believes, having regard to the current status and the future strategy of the Group, that the
Group has sufficient resources to continue as a going concern for the foreseeable future.
8. SHARE CAPITAL
No changes to share capital occurred during the past financial year.
9. CORPORATE GOVERNANCE
The Group subscribes to the values of good corporate governance at all levels and is committed to conducting
business with discipline, integrity and social responsibility.
10. FINANCIAL INSTRUMENTS
The Company classified financial instruments into the following categories at reporting period end.
Loans and Loans and
Financial assets receivables as at receivables as at
30 June 2018 30 June 2017
Trade and other receivables 7 774 201 13 538 230
Cash and cash equivalents 10 874 279 4 269 126
18 648 480 17 807 356
Financial liabilities Financial liabilities
Financial liabilities at amortised cost at amortised cost as
as at 30 June 2018 at 30 June 2017
Finance lease obligations 3 052 426 5 312 413
Other financial liabilities - 2 995 379
Trade and other payables 7 491 012 10 228 677
Bank overdraft 110 381 84 648
10 653 819 18 621 117
11. FINANCIAL RISK MANAGEMENT AND FAIR VALUE
There has been no material change in the Group's financial risk management objectives and policies compared to
those disclosed in the consolidated annual financial statements as at and for the year ended 30 June 2017.
The Group does not currently carry any assets or liabilities at fair value which required any disclosure on its fair
value measurement.
The directors are of the opinion that the carrying amount of the financial assets and financial liabilities approximate
their fair values due to the short-term nature thereof. Remaining long term borrowings bear interest at market
related interest rates which results in the carrying amount approximating its fair value.
12. FUTURE PROSPECTS
The Company strategy is clear: it aims to serve as a Trusted Advisor to its customers, while offering a clear road-
map of the business communications journey. The Company has structured a stack of essential products that will
easily make Digital Transformation tangible and effective. Customers can progress at their own pace, with the
necessary peace of mind, that when ready, they know that TeleMasters has the answer.
Coupled with our strong product offering, we are paying specific attention to Reporting and Analytics, as we firmly
believe we need to help interpret communications behaviour in a business in order to drive optimization and
productivity. We have established a team of Solution Advisors to pro-actively drive and support this strategy and
we are busy growing the team. We are committed to building long term, lasting relationships with our customers,
as we accompany them on their Digital Transformation journey. With this strategy, we have diversified our route to
market: we now have direct and indirect routes to market, which we believe will enable better market penetration.
Our product strategy is centred around driving customers to the Cloud - this is the golden opportunity for customers
to unlock business value and drive efficiency and productivity. We have a brand new, world-class Unified
Communications product which will change the way that our customers do business – this is a game changer.
We will investigate opportunities for diversification and growth within the sector in the coming year through the
identification and acquisition of complementary businesses to further aid in a more unified and competitive product
offering to customers and improved profitability for shareholders. As part of our new direction, we are also placing
renewed focus on our marketing strategy. As a first step, we are in the process of reviewing our brand identity, in
order to align our marketing efforts with the sales activities in progress, but also longer term with what we believe
we want to be for our customers. We are excited at what the future holds, as we morph into the Next Generation
player we believe ourselves to be.
13. CHANGES TO THE BOARD
Mrs Talana Smith resigned as CFO with effect from 31 August 2017 and Mr Brandon Topham was reappointed as
CFO with effect from 1 March 2018. Mr Stephen van der Merwe resigned as independent non-executive director
and chairman on 31 May 2018. In order to bring additional diversification of knowledge to the board, Mrs Mariette
Tappan and Mr Fred Steinberg were appointed on 1 February 2018 and 1 June 2018 respectively as independent
non-executive directors. Mr Steinberg will act as Lead Independent director as Mr Mario Pretorius, who retired as
CEO on 31 December 2017, became the Non-executive Chairman of the Group with effect from 1 January 2018.
Mr Jaco Voigt, a previous non-executive director was appointed as CEO with effect from 1 January 2018. Sasha
Ramirez (née Victor) was appointed as the company secretary with effect from 1 March 2018, replacing TAG
Consulting (Pty) Ltd, which resigned as company secretary with effect from 28 February 2018.
For and on behalf of the Board:
J Voigt BR Topham
Chief Executive Officer Chief Financial Officer
1 October 2018
Corporate information
Directors: M Tappan#, WF Steinberg#, MB Pretorius*, BR Topham, J Voigt, MG Erasmus#
(* non-executive # independent)
Registered address: 90 Regency Drive, Route 21 Corporate Office Park, Irene, 0157 Pretoria (P.O.Box 68255
Highveld Park 0169)
Company secretary: S Ramirez
Auditors: Nexia SAB&T, 119 Witch-Hazel Avenue, Highveld Technopark, Centurion
Transfer secretaries: Link Market Services Proprietary Limited, 13th Floor, Rennie House, 19 Ameshoff Street,
Braamfontein, 2017
Designated Advisor: Arbor Capital Sponsors Proprietary Limited
Website: www.telemasters.co.za
Date: 01/10/2018 08:33:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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